Perry\'s Production Possibilities Frontier Jordan\'s Production Possibilities Fr

Question

Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier 20m Peems 20 18 16 14 12 10 18 16 12 10 1 2 3 4 5 6 78 noveis Refer to Figure 3-4. Perry has a comparative advantage in the production of novels and Jordan has a comparative advantage in the production of poems. poems and Jordan has a comparative advantage in the production of novels novels and Jordan has a comparative advantage in the production of neither good neither good and Jordan has a comparative advantage in the production of novels

Explanation / Answer

A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.

Perry:

2 novels = 12 poems

1 novel = 12/2 = 6 poems

1 poem = 2/12 = 0.167 novels

Opportunity cost of 1 novel is 6 poems and 1 poem is 0.167 novels.

Jordan:

4 novels = 12 poems

1 novel = 12/4 = 3 poems

1 poem = 4/12 = 0.33 novels

Opportunity cost of 1 novel is 3 poems and 1 poem is 0.33 novels.

Opportunity cost of producing novel is lower when it is produced by Jordan. So, Jordan has comparative advantage in the production of Novel and Perry has comparative advantage in the production of poem.

Answer is) poems and Jordan has a comparative advantage in the production of novels.

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